Revolutions have been started on Twitter and riots organised through Facebook, but the traditionally conservative financial services industry has been slow to embrace social media. Custodians have been particularly slow to sign up.

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Tom Coombes, founder and chief executive of public relations and marketing agency Cognito, said: “The financial sector generally is late to the game with this and the business-to-business financial space is even further behind.”

This reluctance has its origins primarily in the strict compliance environment in which most banks operate. In the UK, the Financial Services Authority made clear last summer that its rules on issues such as records retention and advertising apply equally to communications on social media sites.

There is also a cultural issue. James Douglas, senior account executive at records retention specialists Smarsh, said: “The banking industry is very conservative by nature. Their compliance and IT teams are more likely to take advanced measures to protect not only customer information but also their brand.”

Getting people on board

One European custodian that has a registered Twitter account and is developing policies for engaging with other social media is still unlikely to make even its first tweet for the next six months and possibly for the year.

Its marketing manager said: “In social media terms that’s a long time, but there are a lot of internal conversations needed to talk people around, especially – to put it diplomatically – the slightly older generation.”

Facebook, the world’s most widely used social network, is still seen as too consumer focused by most, but executives are increasingly coming round to using Twitter, LinkedIn and YouTube.

Advances in technology mean that social media sites are developing practical uses for the financial sector. LinkedIn’s advertising module enables messages to be targeted at specific industries, organisations and job titles, a development that is set to expand under Jennifer Grazel, Prudential’s former director of online media and now head of LinkedIn’s financial services relationships.

Sarah Carter, vice-president at internet specialist Actiance, said: “It [LinkedIn] has been proactive in listening to the requirements of the industry.” Meanwhile, technology solutions firms are making it easier to ensure compliance through automated systems and record keeping, and to demonstrate returns on investment through tracking, reporting and analytics.

According to Cognito’s Coombes, next year is likely to be the first in which financial services firms will allocate a budget for social media. There is also evidence that institutional investors are willing to engage in financial developments online. Mallowstreet, the online community for the pensions fund industry, for example, has almost 2,000 users, including 525 funds.

There is still a way to go. Suman Garhwal, vice-president of SunGard’s Protegent monitoring and compliance business, said: “Thirty five percent of investment management firms might have a Twitter account, but how often are they tweeting?”

She said too many also cite compliance as a “crutch” to excuse delays that are the result of uncertainty over strategy. But it is changing. Garhwal added: “I am not saying they are opening the floodgates but they are definitely testing the water and dipping their toes in.” Or, as Actiance’s Carter put it, social media in this industry is still “in its first minute of life”. How quickly it grows up remains to be seen.

Early movers

RBC Dexia Investor Services

The custodian has Twitter and LinkedIn accounts, and plans to launch on YouTube. The sites are mostly used to promote company news and analysis, with links back to the company website. Derek Hutchison, head of marketing and communications, said: “We want it to be a competency of the whole organisation.”

JP Morgan Worldwide Securities Services

Its blog for pension fund clients is an invitation-only forum that helps to address compliance concerns. It has 83 members from 52 clients and prospects. “It is less about marketing and more about the exchange of ideas,” said Juliana Wheeler, head of marketing in Emea at JP Morgan WSS. The business also uses LinkedIn, primarily as a recruitment tool.

Citigroup

The Twitter account for Citi’s Global Transaction Services has 842 followers and acts as a distribution channel for company news, events, white papers and press releases. Research of 240 key clients found that almost three quarters regularly or occasionally read these. Barton Hill, Citi’s global head of marketing for securities and fund services, said: “We had thought they were only being picked up by journalists.” Citi also uses LinkedIn, primarily as a recruitment tool.

Societe Generale Securities Services

SGSS has 132 followers on Twitter and uses RSS feeds. It is also one of the few in the financial services sector to have a Facebook page, with plans to develop a community and engage with clients, prospects or job seekers. Valerie Siniamin-Finn, SGSS director of communications, said: “It is still early days in some industries but there is no reason for people not to use the same tools in their business environment that they use on a personal basis.”

BNY Mellon Asset Servicing

While the group as a whole is active on Twitter, Facebook and LinkedIn, there is nothing dedicated to asset servicing. However, in July it became the first global custodian to launch an iPad application for clients. Workbench Mobile allows institutional clients, their investment managers and consultants to access reports and account information, as well as an inquiry tool. It is also planning an app to run on iPhones, BlackBerrys and other smart phones.